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Analysts See May's Same-Store Results as Mixed

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May same-store sales rose about 5 percent year-over-year, with chains posting mixed results. Most retailers missed analysts' expectations, according to Thomson Reuters.

According to Reuters:

"Consumers are consolidating trips to the destinations perceived to offer the most overall value, such as Macy's and Costco," Wall Street Strategies analyst Brian Sozzi said in a research note.

But a rare sales miss by Victoria's Secret owner Limited Brands Inc showed that consumers, still facing high unemployment and gasoline prices near $4 a gallon, are choosy about where they spend and what they buy.

"There's not really a rising tide," said Walter Stackow, senior research analyst for Manning & Napier Advisors, which invests in the retail sector. "For every winner, there's going to be a loser."

Analysts expect U.S. chain stores to show a 5.4 percent rise in May sales at stores open at least a year, according to Thomson Reuters data. That compares with gains of 8.9 percent in April, when a late Easter holiday fueled sales, and 2.6 percent in May 2010, when the economy was still fitful and many experts feared a double-dip recession.

Despite the numbers, as I've written in other monthly roundups, it's important that we remember that the pool of retailers that still report same-store sales numbers is considerably smaller than it once was. Less than 30 retailers use the metric (down from more than 70 a few years ago). Wal-Mart stores, which singlehandedly accounts for roughly 5 percent to 6 percent of the overall retail pie, only reports quarterly figures today. And it has reported comparable store sales declines (excluding fuel sales) for eight straight quarters.

Were they still in the monthly matrix, the figures would look quite a bit different.

My look inside the monthly reports is after the jump.

Thomson Reuters reported a 4.9 percent gain, ICSC estimated that sales rose 5.4 percent, Retail Sails recorded a 5.5 percent gain, while Kantar Retail said the increase was 5.7 percent.

ICSC's tally shows that same-store sales rose 5.4 percent in May based on the results of 27 retailers. That's down from April's gain of 8.5 percent and above March's gain of 2.0 percent. The numbers for the previous two months, however, were skewed by the annual Easter Shift. More Easter-related sales fell in April this year and in March the year prior.

From its monthly write-up:

Although the headline sales performance was strong, it was affected by higher fuel prices. Excluding fuel sales, industry sales rose by 3.7%. The May fuel price lift of 1.7 percentage points was greater than in April when it added 1.1 percentage points.

Overall, industry sales were largely in line with year-to-date performance of 5%, however, segment performance was more mixed. The weak segment was apparel, which was affected by weather--according to some retailers. Apparel chains posted a sluggish 1% gain in May sales--well below its year-to-date trend of 3.6%. Most other segments were more consistent with their year-to-date sales trends, though luxury

outperformed in May (10.4% vs. fiscal ytd gain of 8.8%).

...

Looking forward to June sales (which will be reported on July 7), ICSC Research forecasts that industry sales are likely to increase by between 3% and 4% excluding the impact of fuel and between 4% and 5% with fuel.

Here are ICSC's monthly same-store sales year-over-year changes, not seasonally adjusted, going back to 1993.

Click to enlarge.

icsc-june-11-sales

Here is ICSC's index of same-store sales, seasonally adjusted, going back to 1992.

Click to enlarge.

icsc-june-11-index

According to Kantar Retail, sales-weighted same-store sales increased 5.7 percent in May for the 26 retailers that reported numbers (most of which were apparel retailers). (A pdf with each retailer's results can be downloaded here.) The results were up slightly from the 5.4 percent combined March-April period.

Apparel stores took the brunt of weaker spending plans, according to the firm. The gains were led by the food, drug and mass retailers—particularly Costco and BJ's, who benefitted from higher fuel prices. Department stores held up well, particularly upscale department stores, which benefit from upper-income households less affected by rising prices.

Frank Badillo, senior economist at Kantar Retail, said in a statement, “Spring storms also affected the retail numbers, but there is little doubt that the strongest headwinds slowing sales are from higher prices for food and especially fuel. Shoppers are stepping up their response as inflation persists and discretionary purchases from apparel to homegoods are most susceptible in the months ahead.”

Here are two charts from Kantar's Shopperscape survey, which found that spending intentions fell for the third straight month.

Click to enlarge.

kantar_1_june_11

Click to enlarge.

kantar_2_june_11

Blog RetailSails measured a 5.5 percent gain, looking at 27 retailers. (Walgreen's has not reported yet.)

Here is one chart from RetailSails' post:

sss_monthly_retail_sales_june11_total

While the rising tide of this retail recovery had been lifting all boats through the end of the first quarter, several chains are consistently outperforming rivals with better merchandise and customer service, and last month's performance really separated the winners from the losers.

Preliminary net sales for the 27 retailers we track (note that Walgreen's figures are estimated as they don't report until tomorrow) increased 7.2% from a year ago to $32.6 billion in May, while same-store sales rose 5.5% on top of a 2.8% gain last year – this was the 21st straight monthly gain after 12 consecutive months of declines. For the four-month fiscal year-to-date period, preliminary sales have increased 6.9% and comparable store sales are up 5.2%, on top of a 4.3% rise in the prior-year period.

Luxury chains were the big winners in May, with Saks (20.2% comp gain), Neiman Marcus (+12.0%) and Nordstrom (+7.4%) all beating analyst estimates. High-end retailers continue to fare well because their customers are more immune from inflationary pressures than shoppers at discount stores and mid-priced department stores.

Gas prices have now retreated for three straight weeks, but a gallon of regular gas was still $3.79 on May 30th, which was 39.1% higher than a year ago. While consumers seemingly shrugged off price hikes and kept spending throughout Spring, higher food and fuel prices are “finally taking a bite and affecting sales,” said Ken Perkins, president of research firm Retail Metrics. “It definitely raises the caution flag going into the summer.”

As we approach 2nd quarter earnings and the all-important back-to-school season, there are already worrying signs that revenue growth is slowing and higher costs are eating into margins. Most retailers are still uncertain exactly how much shoppers are willing to absorb price hikes and the bulk of input cost increases won't come through until the summer. This was the first month in quite a while that there are clearly cracks appearing in the foundation of the retail recovery, and if commodity prices stay elevated for long it would not bode well for the growth story in the coming months.

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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